Suppose you are holding $3,000,000 market value in a zero coupon bond with 30 years to maturity. The annual yield on the bond is 12.45%. Suppose we define a bad yield as a yield for which there is only a 95% chance that any yield fluctuation will exceed the bad yield. Suppose that over the last year the average daily yield fluctuation for the bond was 118 basis points. The standard deviation for the average daily yield fluctuation for the zero coupon 30 year bond was 90 basis points. Determine the daily earnings at risk with a 95% probability. Group of answer choices $2,996.79 $71,098.27 $79,750.00 $2,132,947.98

Suppose you are holding $3,000,000 market value in a zero coupon bond with 30 years to maturity. The annual yield on the bond is 12.45%. Suppose we define a bad yield as a yield for which there is only a 95% chance that any yield fluctuation will exceed the bad yield. Suppose that over the last year the average daily yield fluctuation for the bond was 118 basis points. The standard deviation for the average daily yield fluctuation for the zero coupon 30 year bond was 90 basis points. Determine the daily earnings at risk with a 95% probability. Group of answer choices $2,996.79 $71,098.27 $79,750.00 $2,132,947.98

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The real risk-free rate is 3.5%. Inflation is expected to be 2.5% this year and 4.75% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? Do not round intermediate calculations. Round your answer to two decimal places. % What is the yield on 3-year Treasury securities? Do not round intermediate calculations. Round your answer to two decimal places. %
Suppose that a bond makes annual coupon payments at a 7% coupon rate, has 10 years until maturity, and is currently trading at 95. If the yield to maturity on the bond remains unchanged over the next year, what will be the total holding period return on the bond over the period? It should come out to 7.74% but I seem to be doing something wrong, thanks!
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